Energy ombudsman Debra Vaughan has called for utility brokers to be regulated in order to increase consumer confidence in utility markets and in brokers themselves.
Speaking to Utility Week, Vaughan said when Ombudsman Services receives complaints about suppliers of energy to microbusinesses around sales practice, which are often about broker behaviour rather than the behaviour of suppliers. “Because there is no regulation or redress in place for complaints about brokers, we take the complaint about the supplier which may not have done anything wrong.”
She added: “Separating out the two parts of the energy market which are otherwise linked, and putting a clear responsibility on each area of the market should help improve customer awareness and confidence in the companies they use.”
She said some of the issues arise around the legal requirements of what is recorded during the sales conversation between the customer and the broker.
“There are only certain parts of a conversation that have to be recorded to confirm that a contract has been agreed, but you don’t know what sales bluff there has been before that.
“What we have found is the supplier gets a copy of the sales contract call recording, and when we get that in evidence when we are investigating a complaint, we can sometimes hear reference that the customer makes to an earlier conversation. It is clear from that that something has happened that isn’t really playing out properly in the contractual part of the call.”
The ombudsmen have recommended that suppliers ask for the full call to be recorded.
Asked if there were any lessons water companies could take from the energy market, she said: “Do it sooner rather than later, because there have been problems in the energy market as a result of broker behaviour.
“Water companies could learn from that and not leave it to become a problem, start out as you mean to go on. If you’ve got that code and expectation in place from the start, it’s much easier to keep it that way.”
The debate on whether third party intermediaries should be regulated has been reignited recently, as the imminent opening of the water market is expected to attract many brokers currently operating in the energy market.
Peter Sceats, founder and director of water broker The Grand Union Water Company, told Utility Week brokers should be regulated, either by the Financial Conduct Authority or by regulators Ofgem and Ofwat, to protect customers from “Flash Harry” business tactics.
In 2014, energy regulator Ofgem proposed regulating the energy sector’s non-domestic third-party intermediaries (TPIs) through a mandatory code of conduct, partially overseen by the regulator. However, plans were shelved in 2015, as Ofgem said it would wait for the Competition and Markets Authority to report its findings on the energy sector probe, which were published in June 2016.
Water regulator Ofwat has opened a consultation on its principles for voluntary codes of practice for third party intermediaries (TPIs), such as brokers or price comparison websites, in the business retail market. However, it called for formal powers to regulate such TPIs, to ensure customers are treated fairly.